Unit 23 Engineering Procurement


 

Unit 23:

Engineering Procurement


Unit code:
F/601/1500

QCF level:
4


Credit value:
15






Aim

This unit examines procurement or purchasing strategies and their importance in engineering management. The unit shows how procurement contributes to profit and how it helps to maintain a competitive edge.

Unit abstract

Procurement involves the input of goods and services and the interface between the supplier and the client. Large companies organise themselves with a purchasing or materials department to carry out the procurement function. Since the cost of manufacture is mostly made up of material spend as opposed to labour or overhead, companies need to focus on the amount spent on materials. This in turn puts an onus on engineers to design products, organise manufacturing processes and layout a factory with the use of materials in mind. For example, engineers ought to design products with standard sized components to take advantage of lower costs. In fact, many companies deploy engineers into their purchasing departments in order to capitalise on opportunities for cost savings. This unit gives learners an understanding of procurement strategies and their importance in engineering management. The unit also shows how procurement contributes to profit and how it helps to maintain a competitive edge.

The unit starts with an introduction and development of the principles and applications of resource (materials and equipment) management in an engineering operation. It then takes the learner into the strategies for procurement such as systems, roles, risks and managing procurement. Learners then consider the procurement issues of contract, sourcing and evaluation of communications, finance and delivery.

Learning outcomes

On successful completion of this unit a learner will:

1       Understand the principles of resource management and its application to an engineering operation

2       Understand how the procurement strategy contributes to the achievement of an engineering operation’s objectives

3       Understand the importance of the procurement contract and its application to engineering operations

4       Understand procurement pricing and management strategies within an engineering organisation

5       Be able to review and evaluate procurement strategies within an engineering organisation.

Unit content



1      Understand the principles of resource management and its application to an engineering operation

Methods: selection; acquisition; maintenance; replacement criteria

Principles: procurement strategy; specification; supplier identification; selection criteria; working with specialist suppliers; stock control

2      Understand how the procurement strategy contributes to the achievement of an engineering operation’s objectives

Systems and processes: standard specification; tendering; estimating/quoting; methods of procurement eg centralised, contract, lease, Pareto analysis, ‘just in time’ (JIT); equipment; materials; services; terms and conditions

Procurement officer role: assessing operational needs; selecting suppliers; quality and quantity control; timing; company policies; budgetary restrictions eg discounts, receipt and control of purchases, wastage factors

Risks: financial; physical; task duplication; direct and indirect costs; effect on the internal and external customer eg quality issues, legal implications; effect on process and outcome activities of organisations

Managing procurement: profit opportunities; direct and indirect cost saving opportunities; minimising risk; maximising profit; approved supplier lists; evaluating the ‘best deal’; performance indicators and benchmarking


3      Understand the importance of the procurement contract and its application to engineering operations

Contract: definition; different forms; parties; essentials for a valid contract; rules of offer and acceptance; terms eg express/implied, conditions/warranties; vitiating factors eg misrepresentation, fundamental mistake, breaches, fraud

Sourcing issues: method of supply eg buying products/services, tendering, sub-contracting/outsourcing; value for money; hygiene factors; range; choice; service guarantee; legal and contractual compliance; trace origin data; yield; methods of payment; credit and price; negotiating skills

Evaluation: communication; finance; delivery; compliance with specified requirements; packaging; industrial relations; attitude to customers; sample testing and defect elimination


4      Understand procurement pricing and management strategies within an engineering organisation

Pricing management: techniques; negotiating price reductions; controlling or resisting price increases; quantity discounts; prompt payment discounts

Management strategies: competition between suppliers; developing profit margins to increase financial returns; releasing cash and capital by minimising stock; negotiating extended credit; determining the right quality for the right application; negotiating and developing delivery schedules


5      Be able to review and evaluate procurement strategies within an engineering organisation

Review: standard specifications; terms and conditions; monitoring; redeveloping strategy; contemporary developments; comparing and contrasting purchasing options

Evaluate: cost models eg return on investment (ROI), productivity gain, human resource benefits
Learning outcomes and assessment criteria




Learning outcomes
Assessment criteria for pass


On successful completion of
The learner can:


this unit a learner will:










LO1 Understand the principles of

1.1
assess the methods available for managing materials


resource management and

1.2
explain the principles involved when procuring


its application to an





equipment and the ongoing requirements over the life of


engineering operation






that equipment













LO2 Understand how the

2.1
recommend procurement systems and processes with


procurement strategy


related performance indicators and benchmarking for an


contributes to the


engineering operation


achievement of an

2.2
analyse the risks involved in a procurement strategy


engineering operation’s








objectives

2.3
examine the role of the procurement officer within an





engineering operation







LO3 Understand the importance

3.1
explain the importance of a procurement contract


of the procurement

3.2
evaluate the sourcing issues for a procurement situation


contract and its application





using a range of suppliers


to engineering operations











3.3
review the management techniques used to appraise and





evaluate the suppliers of an engineering management





operation







LO4 Understand procurement

4.1
explain the management strategies that can be used to


pricing and management


maximise the purchasing power of the procurement


strategies within an


officer


engineering organisation

4.2
compare pricing management techniques used in an









engineering procurement situation







LO5 Be able to review and

5.1
plan a review and evaluation to measure the success of a


evaluate procurement


company’s procurement strategy


strategies within an

5.2
conduct a review and evaluation for a procurement


engineering organisation





scenario in an engineering operation.

















Guidance

Links

This unit can be linked to Unit 7: Business Management Techniques and Unit 11: Supply Chain Management.

This unit can be linked to the SEMTA Level 4 National Occupational Standards in Engineering Management, particularly Unit 4.17: Obtain Resources for the Implementation of Engineering Activities.

Essential requirements

There are no essential requirements for this unit.


Employer engagement and vocational contexts

Centres should try to work closely with industrial organisations to bring realism and relevance to the unit.

Access to procurement sections of local organisations, if possible, provides a useful information source. Part-time learners working in procurement can be used as a resource by sharing their experiences of different company approaches to procurement.

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